1. Under ED’s Karti Chidambaram scanner: 2 top venture capital firms with a revolving door between them

Under ED’s Karti Chidambaram scanner: 2 top venture capital firms with a revolving door between them

In 2005, it raised funds to the tune of US $200 million. This came from WestBridge Ventures II LLC, Mauritius.

By: | New Delhi | Updated: April 29, 2016 11:19 AM
Karti Chidambaram, WestBridge, WestBridge India In 2006, as Sequoia Capital showed interest in India, Balaraj and his colleagues set up the US bluechip investor’s Indian arm which acquired WestBridge. They stayed with Sequoia until early 2011. (PTI)

Two venture capital firms, both showing impressive growth in the past decade in India, are currently at the centre of investigations by the Enforcement Directorate (ED) in connection with the deal and its alleged association with former Finance Minister P Chidambaram’s son Karti Chidambaram through diverse investments.

The agency had carried out searches at the premises of Westbridge Capital India Advisors and Sequoia Capital India Advisors earlier this month and says it has unearthed documents that not only raise doubts over their investments in Vasan Healthcare, with which Karti is alleged to be linked, but also their funding pattern.

Searches have found references to one “Step Foundation India” where K P Balaraj, one of the managing directors of Westbridge, and Karti Chidambaram are trustees along with C B N Reddy, considered to be an aide of Karti.
ED sources say documents reveal a maze of investments from tax havens such as Mauritius and Cayman Islands. They also show that both Westbridge and Sequoia bought shares of Vasan at very high premium from Advantage Strategic Consulting. For shares that were valued at Rs 201 by Vasan, the companies paid Rs 7,500 per share.

According to ED, the Westbridge India story is “intriguing”. The company was founded by Balaraj, Sumeer Chaddha, Sandeep Singhal and SK Jain, with a corpus of $138 million in 2000. The investment came from WestBridge Ventures I LLC, Mauritius.

In 2005, it raised funds to the tune of US $200 million. This came from WestBridge Ventures II LLC, Mauritius.

In 2006, as Sequoia Capital showed interest in India, Balaraj and his colleagues set up the US bluechip investor’s Indian arm which acquired WestBridge. They stayed with Sequoia until early 2011.

It was during this period that most of the investments into Vasan were made by the company. According to the ED, between February 4, 2009 and November 1, 2010, Sequoia pumped in Rs 212 crore into Vasan. Some of these transactions have come under ED scanner.

Towards the close of 2010, WestBridge purchased 33,600 shares of Vasan for Rs 25.5 crore while Sequoia bought 85,733 Vasan shares for Rs 64.30 crore.

Sequoia also purchased 30,000 shares of Vasan for Rs 22.5 crore from Advantage Strategic. Thus a total of 1,49,333 shares of Vasan were purchased by the two companies for Rs 112 crore at the rate of Rs 7,500 per share.

This when valuation certificate of equity issued by chartered accountant of Vasan (M/s Bysethuraman & Srivathsan) put the value at Rs 201.22 per share, say ED sources.

On February 23, 2011, Balaraj and his three colleagues left Sequoia and floated, this time, WestBridge Capital India Advisors.

This was two months before its Mauritius-based holding company WestBridge Capital Partners LLC was set up with same set of directors.

The same year, the company raised US $500 million through WestBridge Crossover Fund LLC, Mauritius. In 2015, it again raised US $575 million through the same company. ED says the money trail behind this US $1.738 billion raised by WestBridge is under investigation.

According to ED, Balaraj also floated a company named KPB Capital in Cayman Islands in 2000 after returning from USA. In 2008, he floated another company KPB investments in Mauritius and transferred all his assets in KPB capital before winding it up.

E-mails sent to Sequoia, WestBridge and Karti did not elicit any response.

Karti owned 66% of Advantage Strategic and was a director before he exited in 2011 after the firm got embroiled in the 2G scam. Advantage, in turn, held stakes in Vasan. Karti has claimed earlier that all transactions in question have been made by Advantage when he was neither a director nor had stakes.

However, ED claims to have evidence of continued links between Karti and Advantage Strategic. During its last raid conducted at Karti’s and some other offices in Chennai in December last year, ED says it found four draft wills from the laptop of Bhaskar Raman, considered to be another of Karti’s aides. The wills had four current directors of Advantage Strategic bequeathing their share in Advantage to Karti’s daughter after their death. ED also found documents that showed the four had appointed Karti as the one who would execute the wills in case any one of them died.

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